James Paulsen: Some Thoughts on 2016
by James Paulsen, Chief Investment Strategist, Wells Capital Management
Welcome to 2016! Because of its persistent subpar growth rate, the contemporary economic recovery is universally considered disappointing. However, if it continues until March, it will represent the fourth longest in U.S. history. The stock market bull is already the fifth longest and its gain is the fifth best (about a three-fold rise) in U.S. history. Both U.S. nominal GDP and nominal personal income are currently about 25% above their respective levels at the end of the last recovery. There are more people currently employed in this country than ever before and the unemployment rate recently returned to 5%, a level which is lower than two-thirds of the time since WWII.
Finally, both corporate profits and household net worth (at about $85 trillion) are at all-time record highs about 25% above their previous respective peaks reached in the last recovery.
While this may be the most disappointing recovery ever, it is also likely the most “successful” disappointing recovery ever.
While overall economic growth this year will likely remain subpar by historic standards, our guess is the global economy will enjoy its first “synchronized” bounce in real economic activity of the recovery. This probably will be led by a recovery in the materials, energy, and manufacturing sectors due to a lagged response from powerful economic stimulus introduced about the globe during the last year. While better economic growth should be supportive for most stock markets, it may prove conflicting
for the U.S stock market. After a widespread obsession about the potential for a global deflationary abyss, most inflationary indicators may lift in 2016. The first synchronized global economic bounce since the U.S. has returned to full employment, a surprisingly weak U.S. dollar, a revival in commodity prices, and worsening wage pressures may combine to accelerate the Fed’s exit strategy and pressure fixed-income markets around the globe.
Here are the details of several guesses for 2016.
Read/Download the complete report below:
